In an effort to combat terrorism, money laundering, and other illegal or problematic activities, governments and other rule-making organizations have promulgated regulations and guidelines to detect financial transactions and assets used for illegal activities or by persons, governments, or organizations engaged in illegal activity or activity adverse to the rule-making organization.
For example, in the United States, the United States Department of the Treasury has formed the Office of Foreign Assets Control (“OFAC”) to administer and enforce economic and trade sanctions based on United States foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy, or economy of the United States. To accomplish this goal, OFAC routinely publishes a list of names or other keywords that represent the names of known or suspected terrorist organizations, criminal parties, institutions associated with adverse countries or regimes, or other entities. To comply with OFAC regulations, financial institutions processing financial transactions must identify, block, reject, hold, or otherwise specially handle any transaction involving an entity on the OFAC list. Failure to comply with OFAC regulations can result in significant monetary fines or other penalties.
Other agencies within the United States and other countries also publish lists of entities and similarly require that financial institutions identify and block, reject, hold, or otherwise specially handle transactions involving listed entities. Compliance with these numerous and constantly-changing regulations can be difficult for the financial institution, which may process millions of transactions every day, and requires a significant allocation of resources. This is especially true since many of the keywords published by OFAC and other rule-making organizations include common names or words used in many permissible transactions. As a result, a financial institution must look closely at each transaction containing a keyword to determine whether it is, in fact, a problematic transaction and not merely a “false positive.”
Currently, financial institutions rely on large teams of individuals to review each of the many transactions identified each day as containing a keyword. Sporadic spikes and lulls in the number of transactions that contain a keyword result in periods where the team's resources are stretched thin, mixed with periods where the team's resources are under-utilized. Having a large team dedicated to the task of looking for problematic transactions also raises other issues, such as: (1) security of the information handled by the team; (2) background checks and security clearances required for each member of the team; (3) extensive training and monitoring of new members of the team; (4) loss of valuable experience each time a team member leaves the team; and (5) compliance failures caused by inconsistencies and fatigue. What is needed is an improved system for monitoring financial transactions. It would be advantageous if such a system would use less resources and, at the same time, provide improved accuracy, speed, and security.